Key Takeaways

  1. 13th and 14th salaries are additional compensation companies pay to their workforce as either voluntary, performance-based bonuses or as mandatory payments
  2. The 13th and/or 14th salaries are typically paid to all salaried employees on employment contracts
  3. Mandatory 13th month salaries are particularly common in Latin America
  4. If treated as a mandatory salary, they will come under the same tax rate as any other monthly salary payment.

13th month salary is an additional compensation companies pay to their workforce as either voluntary performance-based bonuses or as mandatory payments equal to a month’s salary. Mandatory 13th salaries are particularly common in Latin America, but are increasingly popular in Europe, Asia, and Africa. A smaller number of countries, including Brazil, Greece, and Angola, also require 14th month pay, with an extra payment made in the summer as well.

For companies opening foreign offices or hiring remote talent abroad, it’s essential to know which countries require 13th and 14th salaries. Failing to comply with the law can lead to fines and government sanctions.

In many cases, 13th-month payments are part of collective agreements, sometimes on the national level and embedded in employment contracts. Correctly anticipating costs is essential to budget planning. Otherwise, it’s easy to miscalculate hiring expenses and face an unpleasant surprise at the year’s end.

How does the 13th-month pay work?

The customs and regulations of 13th month pay may differ depending on the country.

For example, 13th-month salary payments are generally made at the end of the year. In some countries, though, the 13th-month payments are split into two payments – one to be made in the summer and one to be made at the end of the year. In other cases, these payments may even be divided into twelve or so payments to be distributed as parts of the monthly salary.

Where applicable, all employees are entitled to 13th-month pay. Still, there may be some deciding factors involved, including how long they’ve been in the company or their position in the organization. For example, in certain leadership or managerial roles one may not be eligible for 13th-month pay.

What Types of 13th Salaries Are There?

The policy typically takes one of three forms.

Mandatory Benefit – In countries that mandate the payment of 13th or 14th salaries, there are penalties for companies that fail to make the payment. In Ecuador, for example, the 13th salary payment is mandatory and paid in December and a 14th salary is paid in March or April. Employees often depend on the additional compensation. The fines that result could be significant but the loss of trust in the workforce may be even more damaging.

Common Benefit – In many countries, companies are not legally obligated to pay 13th salaries, but the practice is widespread. In those countries, such Cyprus and Czech Republic, the idea is closer to the traditional idea of a Christmas bonus granted to increase motivation and employee retention. Here, there may not be fines for not making the payments, but a company’s reputation may suffer if it does not participate and attracting and retaining talent will be more difficult.

Collective Agreements – In some countries, 13th salaries are included in collective agreements. In Italy, for example, under the Italian National Collective Labor Agreement, the 13th and 14th monthly payments are mandatory for employees and salaries are paid in 14 installments.

Who Qualifies for Compensation?

The 13th and/or 14th salaries are typically paid to all salaried employees on employment contracts, though some countries make exceptions for executive-level leaders. It makes no difference if the employees are paid by direct payroll or through an Employer of Record (EOR) arrangement.

For companies with remote employees, employees are governed by the labor and tax laws of the country where the work is performed. This means that even if your company is based in the US, for example, which does not mandate 13th salaries, you may still be obligated to your employees who are based in countries that do.

Independent contractors and freelancers typically do not get the additional salary.

Which Countries Have 13th or 14th Salaries?

As with most labor laws, the administration of these additional payments varies widely from country to country.

Europe13th and 14th Salary Status
Belarus13th salary is not mandated by law but commonly paid to workers in December. It is often included in collective agreements.
Austria13th and 14th salaries are often part of collective bargaining agreement, usually paid in December and the 14th salary paid in May.
Belgium13th and 14th salaries are mandatory – a Christmas bonus (100% salary) paid in December and a Holiday allowance (92% salary) paid in June.
Cyprus13th salary is a common benefit and depends on the employment contract.
Czech RepublicMany employers provide a 13th salary based on performance.
FinlandEmployers commonly provide 13th salary before Christmas.
Greece13th and 14th salary are mandatory in the private sector, paid at Christmas, Easter & in the Summer.
LithuaniaMany employers provide a 13th bonus based on performance.
LuxembourgIt is customary to give an annual allowance called K15 during the second half year. paid equally to all employees.
MacedoniaIt is customary to give an annual allowance called K15 during the second half year. paid equally to all employees.
Portugal13th and 14th salaries are mandatory, paid in June in time for the Holidays and in December in time for Christmas.
SloveniaCommon benefit paid at the end of the year.
SwitzerlandMany employers provide a 13th salary during December.
Middle East & Asia13th and 14th Salaries
Philippines13th salary must be paid on or before 24th December and is equivalent to one month’s pay.
Japan13th salary is customary as a summer bonus paid in June. 14th salary is also customary as a winter bonus paid in December.
ChinaIt is customary to pay a 13th salary at the end of the Chinese year.
Hong KongEmployers commonly provide a 13th salary during December.
India13th salary is mandatory for certain types of employees in India, paid within eight months to the end of the financial year.
Indonesia13th salary is mandatory, paid before Ramadan.
MalaysiaIt is customary to pay a 13th-month at the end of the year.
Saudi ArabiaCustomary to make payment on the Eid al-Fitr holiday.
SingaporeIt is customary to pay a 13th month salary at the end of the year.
TaiwanCustomarily paid on Lunar New Year.
VietnamCustomarily paid on Lunar New Year.
U.A.E13th salary is customary. 14th month is also customary and is paid at the end of the year.
South America13th and 14th Salary
Argentina13th salary is mandatory, paid in two equal instalments. One is paid on or before June 30 and the other is paid by December 18
Bolivia13th salary is mandatory, and a 14th holiday bonus is required if the GDP is over 4.5%.
Columbia13th salary payment is mandatory and paid in two equal parts. One part is paid in December and the other is paid in June to employees who do not receive an “integrated salary.”
Brazil13th and 14th salaries are mandatory, paid in two equal instalments. One is paid by November 30 and the other by December 20. The mandatory 14th month bonus is considered to be a holiday bonus.
Ecuador13th month salary is mandatory and paid in December and the 14th salary is paid in March or April.
Paraguay13th salary is mandatory, paid at the year-end.
Peru13th and 14th salaries are mandatory. 13th is paid in July and 14th is paid in December.
Uruguay13th salary is mandatory, paid over 2 instalments, one in June and one at the year-end.
Venezuela13th salary is mandatory, paid at the end of the year.
Central America13th and 14th Salaries
El Salvador13th salary is mandatory and paid in December as a Christmas bonus. The amount depends on the number of years of service.
Guatemala13th and 14th salaries are mandatory.
Honduras13th and 14th salaries are mandatory. The 13th is paid in December and the 14th is paid in July.
Nicaragua13th salary is mandatory, paid by December 10th
Panama13th salary is required but paid over three equal instalments in April, August, and December.
Costa Rica13th month salary payment is mandatory in Costa Rica, paid by December 20th.
Dominican Republic13th salary is mandatory, equal to one-twelfth (1/12) of the total regular salary earned during the year and paid by December 20th as a Christmas bonus.
Puerto RicoFor companies with at least 20 employees, a bonus of 2% of pay is mandatory. For companies with less than 20 employees, a $300 bonus is mandatory. During the first year of employment, employees receive half of mandatory amount, paid between November 15 and December 15.
Mexico13th salary is mandatory, paid by December 20th as a Christmas bonus.
Africa13th and 14th Salaries
Angola13th and 14th salaries are mandatory. One is a Bonus paid before vacation and the other is a Christmas bonus paid in December.
MoroccoSome employers offer a 13th salary or seniority bonus.
South AfricaMany employers provide a 13th salary during December.

How Companies Calculate 13th Salaries

There are a number of different ways companies calculate their 13th and/or 14th salary payments. The most common method is to divide the total annual pay by 12 and add the amount to the employee’s salary at the designated time. If the country they are operating in also has a mandatory 14th salary, the same process would be repeated.

If an employee’s annual salary is $75,000 a year, then their 13th-month pay will be $75,000/12= $6250

Other companies break down the total annual pay for each employee into 13 or 14 parts. In those cases, the additional pay is already factored into the employee’s gross pay. It is common for the 13th and/or 14th salary to be included in the employment contract.

For companies hiring abroad, it is important to know how the additional salary items are calculated in the country where the employee is based. Otherwise, it is easy to make a mistake in budget planning and either underestimate or overestimate the hiring costs.

How are 13th Salaries Taxed?

The way 13th and 14th salaries are taxed depends on how they are classified in each country. When they are treated as mandatory salary, they often come under the same tax rate as any other monthly salary payment.

When they are viewed as bonuses, it usually depends on the amount that’s paid and whether it crosses a threshold in that country. But even when the added payments are classified as a bonus, the tax laws vary from country to country on how it will be taxed.

Just as there is no single rule on whether the 13th or 14th salary are mandatory or optional, there is no single formula for determining tax rates. It is advisable to consult a guide for the particular countries where you plan to hire to understand the tax ramifications.

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Does annual salary include 13th-month pay?

For the most part, no.

Annual salary means how much an employee gets paid over the course of a year without counting any bonuses or allowances. For that reason, 13th-month pay tends to be excluded from the annual salary.

What is the difference between a 13th-month bonus and a Christmas bonus?

A 13th-month bonus tends to be more mandatory in nature. It’s instilled to help employees cope with the extra spending that tends to come with the end-of-year holiday season.

Christmas bonuses, on the other hand, are less likely to be mandatory and may depend on factors like on the employer’s whims or factors like the company’s earnings or the employee’s own performance. Unless stipulated in the employment contract, it’s usually not mandatory.

Do I have to pay the 13th salary if it’s not mandatory?

If it’s not mandatory, you don’t have to distribute 13th-month bonuses.

With that being said, it’s important to note that in some countries 13th month pay can become mandatory if the company has a history of providing it.